House of Representatives

Financial Sector Legislation Amendment (Crisis Resolution Powers and Other Measures) Bill 2017

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Scott Morrison MP)

[1]

In this context, FMI refers to critical FMI in the form of market operators and clearing and settlement facilities

[2]

Foreign ADIs are not permitted to accept retail deposits in Australia, which generally prevents them from accepting initial deposits smaller than $250,000 from individuals.

[3]

Non-viability trigger events are described in Prudential Standard APS 111 Capital Adequacy - Measurement of Capital, Prudential Standard GPS 112 Capital Adequacy - Measurement of Capital, and Prudential Standard LPS 112 Capital Adequacy - Measurement of Capital. For example, for a capital instrument issued by an ADI incorporated in Australia, a non-viability trigger event is:

(a)
the issuance of a notice in writing by APRA to the ADI that conversion or write-off of capital instruments is necessary because, without it, APRA considers that the regulated entity would become non-viable; or
(b)
a determination by APRA, notified to the regulated entity in writing, that without a public sector injection of capital, or equivalent support, the regulated entity would become non-viable.

[4]

See for example Prudential Standard APS 111 Capital Adequacy - Measurement of Capital, Attachments F and J.

[5]

The 'resolution period' where the trigger event for the stay provision is appointment of a statutory or judicial manager, or recapitalisation under a statutory or judicial manager, will continue to be the period from the trigger event to the end of the next business day. If the trigger event relates to a compulsory transfer of business, the resolution period will continue to be the period from the trigger event to just after a certificate of transfer comes into force, unless APRA is satisfied it will not issue a certificate and declares an early end to the resolution period.

[6]

Note that foreign ADIs are not permitted to accept retail deposits in Australia, which generally prevents them from accepting initial deposits smaller than $250,000 from individuals.

[7]

As noted above, the fact that APRA has the ability to seek the appointment of a liquidator or provisional liquidator does not preclude it from exercising its other crisis management powers, including appointing or seeking the appointment of a statutory or judicial manager, in appropriate circumstances, whether or not the entity is insolvent.


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